The Commodity Futures Trading Commission (CFTC) today issued an Order extending the effective date of the provisions in the swap regulatory regime established by Title VII of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) from tomorrow to December 31, as the CFTC continues to implement rules to reduce risk and enhance transparency in the swap markets.
The order provides temporary relief from certain provisions that will become effective as of tomorrow until the CFTC completes the rulemakings specified in the order. The CFTCs action will avoid disruption in the markets and will provide for the orderly implementation of the new comprehensive swap regulatory regime mandated by Congress. This order is temporary, and it will expire upon the effective date of final rules or December 31.
In our effort to protect the American public, the CFTC is now approving final rules called for in the Dodd-Frank Act with more final rules to be considered in upcoming meetings next week, in August and throughout the fall. Today, we are granting temporary relief from certain provisions that would otherwise apply to swaps or swap dealers on July 16, said Gary Gensler, chairman of the CFTC. This order enables the Commission to continue its progress in finalizing rules.
Specifically, the CFTC provided temporary exemptions from certain provisions of the Commodity Exchange Act (CEA), in two parts. First, the CFTC provided relief from certain provisions of the CEA added or amended by the Dodd-Frank Act that do not require a rulemaking but that reference one or more terms regarding swap entities or instruments that the Dodd-Frank Act requires be further defined (such as the terms swap, swap dealer, major swap participant or eligible contract participant). The CFTC, jointly with the SEC, has issued two notices of proposed rulemaking to further define these terms, but these final rulemakings will not be in place as of tomorrow. The provisions subject to this exemption are listed in Category 2 in the Appendix to the Commissions Order.
Second, the CFTC provided relief from certain provisions of the CEA that will or may apply to certain agreements, contracts and transactions in exempt or excluded commodities (generally, financial, energy and metals commodities) as a result of the repeal of several CEA exemptions and exclusions by the Dodd-Frank Act as of tomorrow. This exemption is based on the CFTCs existing Part 35 exemption for swap agreements but will be available for certain agreements, contracts and transactions that may not otherwise qualify under those rules (for example, if they are cleared). This exemption also is temporary and shall expire upon the earlier of the Commissions repeal or withdrawal of Part 35, or December 31.
The temporary exemptions issued today are subject to several important conditions, including: no limitation on the Commissions anti-fraud or anti-manipulation authority under the CEA, no application to any provision of the Dodd-Frank Act or the CEA that has become effective before tomorrow, no effect on any effective date set forth in any rulemaking issued by the Commission to implement provisions of the Dodd-Frank Act and no effect on the applicability of any provision of the CEA to futures contracts, options on futures contracts or cash markets.
The Commissions Order says that many of the swap provisions in the Dodd-Frank Act require a rulemaking before they become effective, and so these provisions are not subject to the Commissions Order because they will not become effective tomorrow. These provisions are listed in Category 1 in the Appendix to the Order. Further, Category 4 in the Appendix to the Commissions Order lists provisions for which the Commission has determined not to issue relief, and which therefore will go into effect beginning tomorrow.
(CM)